What do individual shareholders gain when they buy shares of a company’s stock?
2 answers:
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Answer:
a)
The rate of return of stock for each scenario has different probabilities. The probabilities for each scenario has changed. The mean return and variance of the stock will be changed due to change in probabilities. By observing the probability ans stock returns, it can be said that the expected return and variance will be higher. The reason to this; the severe recession scenario has higher probability compared to the previous probabilities.
b)
The Standard deviation = 21.32.
This shows an increase which was discussed in part a)
c)
The new convergence is -42.93
The convergence changed to -42.93 because the severe recession scenario and in boom scenario has higher stock returns. Therefore, in the calculation of mean, more weightage is of these returns and so their deviation from mean is notable.
Explanation:
